2011: A Strong Rebuilding Year for Home Depot

As 2011 comes to a close, it's a great time to look back at what happened to the stocks that interest you. By making sure you know the important things that a company accomplished -- as well as the setbacks it experienced -- you can make a better decision about whether it's a smart investment for your portfolio.

Today, let's take a look at Home Depot (NYS: HD) . With the housing market in a seemingly endless slump, you'd expect a big-box home improvement store to take it on the chin. Yet as some minor sparks finally started to emerge in housing, investors bid up Home Depot's stock pretty strongly in 2011, and it now trades at levels higher than from before the market meltdown. Below, I'll take a closer look at the events that moved shares of Home Depot this year.

Stats on Home Depot

2011 YTD Return

23.6%

Market Cap

$64.9 billion

1-Year Revenue Growth

3.1%

1-Year Earnings Growth

19.5%

Dividend Yield

2.8%

CAPS Rating (out of 5)

***

Sources: S&P Capital IQ; Motley Fool CAPS.

Why did Home Depot do well this year?Although looking at the stock wouldn't suggest it, Home Depot's business has been in the dumps for years, with a sluggish economy and bad housing market depressing demand. Lowe's (NYS: LOW) has seen similar trends, while earlier this year, hardwood flooring specialist Lumber Liquidators (NYS: LL) and alternative decking material maker Trex (NYS: TREX) both saw big smackdowns as they fell short of expectations leading into the hot summer months.

But even as natural disasters like Hurricane Irene hurt most businesses by keeping shoppers away from their stores, they helped Home Depot, as customers needed to rebuild from storm damage. Yet while the company said that results definitely got a boost from the weather, the strongest region during the third quarter was the West, which obviously was nowhere near the hurricane.

One thing Home Depot did very well this year was rewarding shareholders by returning their capital. The company not only bought back more than $3 billion in shares over the first three quarters of the year, but also raised its dividend twice, going from $0.236 per share late last year to $0.29 per share for its most recent payment. Going forward, Home Depot now anticipates paying out fully 50% of its net income.

Looking forward, pent-up demand may finally be working in the industry's favor. With home sales on the rise, housing-sensitive companies like Sherwin-Williams (NYS: SHW) , Williams-Sonoma (NYS: WSM) , and Pier 1 (NYS: PIR) should hopefully be able to join Home Depot in a longer-term rebound.

Home Depot's done well in 2011, but for next year, we like another stock better. Check out the Motley Fool's latest special report to discover our top stock pick for 2012. It's free but it won't be available for long, so get your copy now.

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At the time this
article was published Fool contributor Dan Caplinger doesn't own shares of the companies mentioned. The Motley Fool owns shares of Lumber Liquidators. Motley Fool newsletter services have recommended buying shares of Williams-Sonoma, Home Depot, Lumber Liquidators, Sherwin-Williams, and Lowe's, as well as writing covered calls in Lowe's. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.